Miners use custom-built devices with high computing efficiency to mine Bitcoin. The high price of Bitcoin has developed an interest in mining-related activities in recent years. However, the mining profitability gets reduced as more miners get involved, and the rewards get halved almost every four years.
Keeping the decrease in profitability in mind, let’s take a look at the steps to maximize your Bitcoin mining profits in the coming years.
Now let’s get to know the details, starting with Bitcoin.
What Is Bitcoin (BTC)?
Bitcoin is a cryptocurrency developed by Satoshi Nakamoto, an anonymous person or a group, in 2009. It is a simple virtual currency that can act as a payment method without mediators like banks or financial institutions.
Therefore, the introduction of Bitcoin played a crucial role in representing the concept of a decentralized ecosystem. Here, you can transfer your virtual assets in this ecosystem without depending on a third-party organization or company.
Bitcoin is the largest cryptocurrency, with a market capitalization of $332 billion. Following the acceptance of Bitcoin, numerous other cryptocurrencies emerged in the crypto market, leading to a new economic market. As a result, the global crypto market is now valued at nearly $850 billion, with thousands of projects and cryptocurrencies.
The major advantage Bitcoin provides is that you don’t need to own a whole BTC token. Here you can own a minimal unit of BTC. For example, Satoshis is the smallest unit of Bitcoin, where 1 Satoshi equals 0.00000001 BTC.
Having known about Bitcoin, let’s take a look at Bitcoin mining.
What Is Bitcoin Mining?
Bitcoin mining is a process that involves the verification of transactions, the discovery of new blocks, and then its addition to the Bitcoin blockchain. Whenever a miner finds a new block, the miner gets the right to fill the located block using new transaction data. So, why does someone dedicate their time and effort to this mining process? Let’s get into that.
Once a miner completes the mining process, they receive a block reward. This reward consists of newly minted Bitcoins. Interesting right?
During the launch of Bitcoin, the miners were rewarded 50 BTC as a mining reward. However, the miner’s reward gets reduced to half nearly every four years, and this event is known as “Bitcoin Halving.”
The last halving occurred in May 2020, rewarding the miners with 6.25 Bitcoins. The next halving is expected in 2024 when the rewards are reduced to 3.125 Bitcoins. This process continues till 2140 when a total of 21 million Bitcoins are mined.
How Can You Mine Bitcoin?
To mine Bitcoin, you need to know the process involved:
The first step involves setting up hardware devices capable of executing Bitcoin mining. The more powerful your computing system, the faster the complex puzzle-solving efficiency. You need to set your device’s capacity based on your mining effort’s output.
Hardware devices are the most expensive investment for a miner. A good computer with a graphics processing unit (GPU) will be enough for basic miners. For advanced miners, application-specific integrated circuits (ASIC) can be used; This customized IC chip is designed only for the mining process.
Once you have completed your hardware setup, you need to install mining software on your system. This software helps you to execute the mining process effectively. Most mining software is free and available for Mac and Windows users. The most commonly used software include multimineral, MXR miner, and CG miner.
Apart from mining software, miners also require to set up an e-wallet. This wallet needs to be connected to the software that executes the mining process. Once the mining is verified, miners receive their Bitcoin rewards in their connected wallets. Moreover, you can use this wallet to store and transfer your Bitcoins.
After completing the first two steps, miners must select a solo mining or mining pool to conduct their Bitcoin mining. You can choose solo mining if you have multiple computing devices and advanced mining setups.
You can choose mining pools if you have minimum system requirements to mine Bitcoin.
How To Maximize Bitcoin Mining Profits?
As you have understood the process of Bitcoin mining, let’s check how you can increase profits from Bitcoin mining.
Join Mining Pool
As mentioned above, it’s better to choose a good mining pool for individual miners. Here, you can join with other miners to complete the mining process. There are mainly two types of payouts; proportional and pay-per-share.
After the process, a proportional payout miner is rewarded based on their effort. Whereas, in the case of pay-per-share, it rewards the miners in the pool equally.
Choosing these two payout methods allows you to invest less in your hardware devices. Thus increasing your mining profitability.
Efficient Mining Equipment
The hardware used in mining is costly, and understanding your mining result is important before deploying significant capital on the devices. Here, you can use mining profitability calculators to find your mining output based on your system specifications. These calculators will give you a clear idea of how to buy the hardware that makes you profitable.
Moreover, the electricity your devices consume will also affect your profitability.
The cryptocurrency market is highly volatile, and the market sentiments also affect the price of Bitcoin. For example, suppose you calculate the mining profits before mining, and the Bitcoin price falls 15%; In that case, the price can hugely impact your profitability. Here, hedging can help you to reduce this negative impact.
The simple method is to use option contracts. This method is suitable for miners with a basic understanding of the crypto market and how options work. For example, in this method, if a miner finds a possibility of a fall in Bitcoin’s price, they can buy or sell BTC options based on the market conditions.
The difficulty of mining Bitcoin increases with time, resulting in a reduction in mining profitability. During the initial Bitcoin days, miners received 50 Bitcoins as a reward. But, as we know, the mining reward will further reduce to 3.125 Bitcoins in 2024.
Keeping these scenarios in mind, you can follow the steps mentioned in this article to maximize your Bitcoin mining profits.
Q1: Which are the best profitable Bitcoin mining pools?
A1: The best profitable Bitcoin mining pools are Binance, F2pool, and Slushpool. These mining pools support ASIC and GPU equipment.
Q2: How can I calculate my Bitcoin mining profitability?
A2: You can calculate your Bitcoin mining profitability using calculators like WhatToMine, CoinWarz, CryptoCompare, and NiceHash. These calculators will provide you with the approximate profitability rate.
Q3: Can I mine Bitcoin using my laptop?
A3: Yes, you can mine Bitcoin on a smaller scale using your laptop. Here, the profitability will be very less. To gain higher profitability, you need to upgrade your mining hardware.
Q4: How can I reduce the electricity costs of mining?
A4: You can use more efficient computing devices that will consume less power during the mining process. Moreover, you can use renewable energy sources like solar energy to power up your devices.
Q5: What hardware do professional miners use to mine Bitcoin?
A5: The best hardware used by professional miners consists of ASIC devices. These devices are custom developed to provide the best mining efficiency.